Investors hoping Pandora Media's (NYSE: P) stock would be a winner have been severely disappointed. Apple (Nasdaq: AAPL) recently announced it was launching a competing service, and shares of P declined 30 percent in just 3-months. The company also faces challenges related to royalty rates, which it says are way too high.

On the bright side, Pandora has grown its business into a powerhouse, accounting for 70 percent of internet radio share and 7 percent of total radio share. Its app is among the top downloaded music on both iOS and Anbroid, a fact that will be increasingly difficult for advertiser to ignore, thinks analyst John Tinker of Maxim Group.

"Pandora's business model challenges are well known—paying royalties for every song played means that greater usage results in higher costs, and there is a lag in monetization as internet listening advertizing receives a lower CPM than traditional viewing/listening," said Tinker.

Pandora is expected to pay more than 50 percent of its revenues as royalties in 2013, compared to 8 percent by satellite radio and 15 percent by cable radio.

On November 28th, CEO Joe Kennedy argued for change before a Judicial Committee regarding Internet Radio Fairness Act, and without a doubt investors are on pins and needles as they await results.

Commenting on the developments, Ticker said "Over time, we expect monetization efforts to come to fruition and drive strong revenue growth. We are uncertain about the outcome of royalty rates negotiation currently in progress with CRB. However, if the CRB decides that internet radio should receive a lower royalty rate, this should benefit the internet radio industry in general."